Coarse Grain Cereal Prices; Warehouse Receipts Act: Can it work for eggs

Coarse Grain Cereal Prices

Last week saw little change in the prices of coarse grains in India on an average. Though there were some highs on some grains in particular markets, it can not be termed as a rally.

Maize stocks are arriving is Bihar, Parts of Karnataka, Andhra Pradesh and Tamil Nadu keeping in prices in check. The market expects the price to shoot up in the middle of June 2005. Last week prices of maize ruled from a low of Rs.4915 ($113) per ton from local maize to a high of Rs.5742 ($132) per ton for Red maize. Spot prices at Nizamabad and Davangrere ranged at Rs.5220 ($120) and Rs.5300 ($ 122) per ton respectively. Future prices for June, July and August were Rs.5350 ($123), Rs.5481 ($126) and Rs.5611 ($129) per ton. The average price at Mandis (market yard) was Rs.5524 ($127) per ton and cost at the end user site was approx. Rs.6000 ($138) per ton. Prices in US are little higher and FOB (US Gulf) prices for yellow corn were ranging from $99 - $102 per ton.

Pearl Millet (Bajra) prices have come down as stocks have arrived in various markets in Rajasthan and Uttar Pradesh. The average prices were higher than the Minimum support prices announced by Govt. of India. Pearl Millet was being traded at Rs.5176 – Rs.6264 ($119 – 144) per ton in various markets.

Barley prices firmed up and were little higher than last week. The prices ranged from a low of Rs.5742 ($132) to a high of (rs.6525 ($150) per ton. Average prices at the end user was reported to be Rs.6000 ($138) per ton. Prices in US were reported to be $122 per ton (FOB PNW)

Prices of Grain Sorghum (Jowar) have also firmed up in some of the markets. The commodity was traded at a low of Rs.5785 ($133) per ton and a high of Rs.7960 ($183) per ton at various market yards. The end user prices was averaged at Rs.7656 ($176) per ton. US prices ranged from $103 – 108 per ton (FOB US Gulf)

The freight rates are currently much lower and as per the report received the anticipated increase in container freight rates has been put off, which would make importing specially grains cheaper to some extent.

The detailed U S Grains Council weekly report can be found at the following link.

http://www.grains.org/buying/market_perspectives/mp_05-27-05.pdf

The prices of corn co-products have shown an increasing trend. Corn gluten feed with 21% percent protein was traded at $88 per ton, while Corn gluten meal with 60% protein was traded at $360 per ton.

Warehouse Receipts Act: Can it work for eggs

The working group within Reserve Bank of India has deliberated on the issues pertaining to the running of the warehouses and commodity futures and has recommended that a Warehouse Receipt Act be passed, and make a Warehouse Receipt a negotiable instrument.

Currently no banks treat a Warehouse Receipt as a negotiable instrument as the warehouses are not accredited and the banks have no mechanism to track the commodity in case of a default.

While in Russia the warehouse receipt program is working well for commodities, it is yet to start in India. The program will help the farmers realize a better price for their produce.

In Russia, warehouses are accredited by the Russian Grain Union (RGU) and the receipts issued are used as negotiable instruments. RGU has developed and published standard technical procedures and documentation, and negotiations have been undertaken with multiple elevators, grain merchants, banks, and insurance companies to facilitate the design and use of the program. The commodities kept in these licensed / accredited warehouses are used as collateral to gain access to funds, which help the end users and allow growth.

While for the commodities like grains as well as fruits it can work very well, it needs to be seen if it would work for eggs as well. In most cases eggs are stored in cold stores in South, West and North India as the prices dip in summer months and also the demand is lower. The farmers during this period would be able to use the receipt issued by the accredited warehouses / cold storage and leverage funds from banks, for use. Under normal circumstances, the farms during the period stop bird replacement as all the money is tied up in eggs stored in the warehouse. A creation of a voluntary warehouse receipt system will be an advantage to the layer industry and will help the industry grow much faster than the 4% - 5% it is currently growing at.

Amit Sachdev
Representative
U S Grains Council, India
bluecross303@gmail.com